Atlas does shrug

A simple calculation is telling. Assuming no behavioural change, raising the top marginal rate from 46.5 per cent to 49 per cent for those earning above $180,000 would increase annual income tax collections by about $1.2 billion. However, if the response in Australia parallels that in Britain, instead of rising, taxes collected from top-income earners could actually fall by up to that amount. Nor is it difficult to see why: 30 per cent of the top taxpayers in Australia are 55 or over, so are making choices about how long to continue working; nearly a third are in occupations which have substantial discretion over the timing and form of income; and a majority have sources of non-taxable income which offer opportunities for rearranging tax liabilities. But while reducing the tax take, all those adjustments impose steep economic costs, with each dollar raised shrinking ­national income by at least 50c.

A simple calculation is telling. Assuming no behavioural change, raising the top marginal rate from 46.5 per cent to 49 per cent for those earning above $180,000 would increase annual income tax collections by about $1.2 billion.

Shades of the old 15% “Reservists Tax” that Keating introduced. It was supposed to raise 15million, but ended up costing 20million as now we could deduct all our expenses.

Originally the ATO disallowed a lot of deductions or reduced them by 50% until taken to court. Seems Treasury forgot that most officers in ranks from Major to Major General were lawyers , or CFO types and had their tax specialists work probono. That tax lasted a year as I recall.

Comments are closed.

Liberty Quotes

Every innovation makes its appearance as a luxury of the few well-to-do. After industry has become aware of it, the luxury then becomes a necessity for all.— Ludwig von Mises